Gold rebounds in Dubai

There's one reason why consumers have pushed up average daily sales volumes to 200 to 225 kilos in the Emirate.

Dubai’s gold and jeweler trade is seeing its biggest rush of buying activity since April last year as shoppers make full use of the continued softness in the metal’s prices, now around the $1,200 an ounce mark. It has thus fired up the category’s sales during DSF 2014, with daily volumes since January 2 averaging 200-225 kilos from the 180 participating jewelry outlets in Dubai, according to sources at Dubai’s Gold and Jewelry Group.

Last year, average volumes during DSF was 150-170 kilograms, when gold was ruling at $1,640 an ounce. It was immediately thereafter, in early April, that gold prices started losing its luster and made sure that it was the worst year for the metal since 1981.

Last year, gold shed 28 per cent in value according to an article in Gulf News[2].

That is exactly why UAE shoppers and visitors to Dubai are heading for jewelry outlets now. While analysts question whether gold can ever aspire to reach anywhere near the highs — it was ruling at an all-time peak of $1,900 an ounce in August 2011 — shoppers are making sure they have the finances to make the purchases and make use of the current low value.

“Average transactions per buyer now are for 20-22 grams as against the 16 grams when prices were in the $1,400-1,600 range,” said Shamlal Ahmad, director of international operations at Malabar Gold and Diamonds.

There is also a sentiment, and this could be something that consumers are buying into, that gold prices just cannot drop much further. “The $1,200 could be the new base, say $15-20 either way; for value to head towards $1,000 an ounce will be quite a stretch as mining and production costs — and these have not gone down —all need to be factored in,” said Cyriac Varghese, general manager at Sky Jewelry.

“This is why volume sales are back in fashion in Dubai’s jewelry trade — shoppers seem to have made their minds that is the extent of gold value’s downside.”

And if they still needed convincing, here’s the clinching argument to buy now — a chance to win 1 kilogram of gold each day right through the duration of the DSF[3].